Recently, I have noted that several insurance companies have entered the investment field. Similarly, several investment companies have made forays into insurance. My confusion is not related to what products and services these companies now offer, but rather about why they chose to offer the new products and services in the first place. I used to know what these companies represented . . , what business they were in. Now, however, these companies no longer occupy a clear cut position in my mind. In short, they are having a “business identity crisis.”
Insurance and financial companies are not the only organizations whose expansions have created confusion for consumers. In fact, almost every industry or sector of our economy has examples of companies that have shifted, modified or expanded their basic business premise. For example, today you would be hard pressed to find the classic “burger joint” that didn’t also dabble in salads, ice creams, and chicken. The same is true of ice cream establishments that offer hot food. Federal Express built a business that focused on overnight delivery, but now offers Fed Ex Ground. Gateway and Dell are offering televisions and other electronic goods.
Expansion and change is not necessarily a bad thing. In each of the examples above, however, the product expansions greatly eroded the ability of a consumer to associate with a business. The health of business and its brands can be measured by the speed with which a consumer can tell you what the business represents. The more things a business represents, the more time the consumer needs to think about that business, and the slower they are to respond. When consumers hear Volvo, they immediately think “safety” thus indicating a strong brand and business. Similarly, the term “coffee” pops into the mind of the consumer when they hear Starbucks. Both of these brands have maintained a narrow focus, avoided a business identity crisis, and retained a strong position in the mind of the consumer. To keep a business and its brand strong, some basic principles must be followed.
Narrowly define your business.
Customers want to buy from the industry leader. The quickest way to become that leader is to redefine your industry. When Subway was founded, it didn’t associate itself with the fast food industry, nor with the delicatessen industry. Rather, it defined its industry with a specific type of sandwich – the submarine sandwich. Subway instantly became the leader of the then small but growing submarine sandwich market. This narrow focus allowed Subway to enjoy a unique niche in the mind of the consumer and avoided a lot of direct competition with other fast food franchises.
Expand with caution.
Products can be added to a line as long as the focus of the business is not muddied in the eyes of the consumer. A pizza establishment might add a specialty pizza to the menu, but should carefully consider adding hamburgers. The addition of hamburgers might confuse consumers. The once narrowly defined pizza business now becomes a restaurant with a less clear position in the mind of the consumer. Single mindedness leads to success. Every marketing action that a brand undertakes should reinforce and support the primary focus of the brand. Advertising, public relations and personal selling should all serve to reinforce the brands position in the mind of the consumer. Pricing should be appropriate for the brand image.
Avoid greed.
Most brands expand their focus in order to generate additional revenue. In the short term, it is possible to achieve this goal. However, in the long term, quick and careless expansion decisions that don’t fit with customer expectations almost always lead to reduced market share. Conduct a “business identity” audit. Critically analyze your business identity on a regular basis. The identity audit starts by asking the one simple question: “What business am I in?” If your answer starts with the words: traditionally, historically, or “I used to be in . . .” Your business is likely having an identity crisis. If you can
answer in one or two words (i.e., The antique furniture business, fine jewelry) you are one your way to building a strong business identity.
Savvy marketers know that their company’s name will be remembered by consumers only if they are “tops” in their business. By narrowing your business focus and emphasizing that focus in all of your marketing activities, you will earn a very specific place in the mind of the consumer. As a businessperson, you want to own a very specific place in the mind of your customer.
